The Israeli interior minister has said he plans to revoke the citizenship of Arab Israelis who have been involved in attacks on Israeli targets.

Prime Minister Ariel Sharon has praised the move, which has been condemned as racist by human rights groups.

Such people cannot have citizenship of the state of Israel and enjoy all its conditions... and at the same time pose a threat to its existence

Interior Minister Eli Yishai

In a separate decision, a court ruling on Tuesday upheld Israel's policy of demolishing the homes of suicide bombers without warning the people who live there.

Palestinian negotiators are meeting to discuss a proposal made by Israeli Defence Minister Binyamin Ben Eliezer of a phased Israeli withdrawal from areas where the Palestinian Authority takes steps to quell attacks on Israeli targets.

In initial comments, Palestinian officials have rejected the proposal as "a public relations game".

After several days of bloodshed, the violence continued on Tuesday with the killing of two Palestinian gunmen near the West Bank town of Jenin.

One of the gunmen has been named as Ali Ajouri, a local leader of the Al Aqsa Martyrs' Brigade militia in a refugee camp near Nablus.

'Slippery slope'

Interior Minister Eli Yishai said he had sent letters to two Israeli Arabs who are suspected of helping the militant Popular Front for the Liberation of Palestine, warning them that he was considering stripping them of their citizenship.

He also threatened to revoke the permanent resident status of a third.

"If I stop one terrorist from killing one Jew, not to mention more than that, it will be worthwhile to revoke the citizenship of 10 or more and to stop this terrible plague," Mr Yishai said.

If the new move saves one Jew it will be worthwhile, says Mr Yishai

"Such people cannot have citizenship of the state of Israel and enjoy all its conditions... and at the same time pose a threat to its existence," he said.

Palestinian activists have said the move is discriminatory.

"Any government that has attacked a minority in its midst immediately began sliding down a slippery slope towards an undemocratic regime," Shawki Khatib, chairman of the Israeli Arab Monitoring Committee, told Israeli army radio.

About 20% of Israel's population is Arab.

Mr Yishai said that the revoking of citizenship was allowed under the citizenship law, under which "the interior minister may cancel the Israeli citizenship of anyone who has committed an act which constitutes a breach of trust with the state of Israel".

He was evasive when asked whether Israeli Jews could face a similar punishment, the Jerusalem Post reported.

Petition dismissed

In a separate move, a court ruling on Tuesday upheld Israel's policy of demolishing the homes of suicide bombers without warning.

It dismissed a petition by relatives to be given advance warning of demolitions to allow them to appeal against the decision.

This week, Israel demolished the homes of nine suspects - a practice which has been condemned by human rights groups.

Palestinian officials have given a cool response to proposals made by Mr Ben Eliezer at a meeting with Palestinian Interior Minister Abdel Razak Yahya - the highest-level publicly-announced meeting in two years.

It does not express anything but the lack of seriousness by Israel to put an end to the comprehensive aggression and the comprehensive siege

Arafat aide

The defence minister put forward a plan to withdraw Israeli forces from places where the Palestinian Authority takes control and prevents attacks on Israeli targets.

The eventual aim would be for Israeli troops to return to the positions they held before the uprising began.

The proposal would initially be implemented in Gaza - potentially allowing workers from the region to return to work in Israel.

An aide to Palestinian leader Yasser Arafat said the plan was "totally rejected".

"It does not express anything but the lack of seriousness by Israel to put an end to the comprehensive aggression and the comprehensive siege," said Ahmed Abdel-Rahman.

The United Nations General Assembly has passed a resolution demanding the immediate withdrawal of Israeli forces to the positions held before September 2000.